GBP: Yield support and resilience versus energy shock – MUFG
|MUFG’s Head of Research Derek Halpenny highlights that the Pound is currently the third best performing G10 currency since the conflict began, supported by a sharp 35 bps jump in UK 2-year yields and reduced BoE rate-cut pricing. He contrasts this with 2022’s Russia-related energy shock and warns that higher energy and food prices could pressure real incomes and inflation expectations.
Pound outperforms as BoE cuts repriced
"The performance of the pound stands out."
"In fact, the pound is the third best performing G10 currency since the conflict began, with only the Australian and Canadian dollars performing better."
"That is certainly somewhat surprising based on the most recent episode – the Russia-related energy shock in 2022."
"The MPC will certainly be more wary of cutting rates given the fact that there are already a number of hawks who were concerned, prior to this energy price spike, about the continued stickiness of underlying inflation."
"Yield certainly appears to be providing the pound with support but whether that would persist is questionable given the potential hit to real incomes."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.